The service will be offered through a planned Kmart e-commerce site dubbed
BlueLight.com and will be powered by Spinway, a free ISP with funding from
Masayoshi Son's Softbank and Seagate founder Al Shugart, the sources said.

Yahoo will become the interface for the co-branded service on
BlueLight.com, sources confirmed.

Yahoo declined to comment on the
deal. Kmart was not immediately available for comment.

A Spinway spokeswoman would not confirm or deny the company's involvement
in the BlueLight.com venture.

A number of signs point to Spinway's involvement, however.

The header on BlueLight.com's Web site reads "BlueLight.com @ spinway," and
the site has one text phrase posted that reads: "Something exciting and fun
is on the way..." A search on Network Solutions' Whois domain directory
shows the BlueLight.com name registered to Softbank.

A Kmart representative said the company will hold a press conference
tomorrow morning in New York at the Waldorf Astoria Hotel to make "an
announcement in regards to their e-commerce strategy."

A Spinway representative said the company also will hold a press conference
tomorrow morning at the Waldorf Astoria to make an undisclosed
announcement. In addition, Spinway is holding a launch party tomorrow
evening in San Francisco, according to an email invitation sent to CNET
News.com.

News of the expected deal comes as more Internet heavyweights are turning to offline retail chains to add mainstream consumers to their services. Microsoft recently inked a deal with RadioShack to market its services. America
Online also is expected to
announce a similar cross-marketing deal with Wal-Mart, according to
Salomon Smith Barney analyst Richard Church.

The trend toward striking deals with brick-and-mortar stores could indicate
that Internet giants are looking for ways to add more mainstream consumers
to their services. Internet growth in recent months has slowed, according
to reports by Media Metrix, leaving some analysts to wonder whether the
phenomenon will hurt Internet
stocks.

Similar to free ISP 1stUp.com, which powers AltaVista's free Internet
service, Spinway requires users to download an interface that feeds
advertisements to them. By doing so, the company can track user behavior
and habits. With this information, the free ISP can sell spots on its
interface to advertisers looking to target their product messages.

For Yahoo, the co-branded Internet access service could serve as another
vehicle through which to build its audience. And the deal could further extend Kmart's Internet efforts by allowing it to market a well-known Internet brand.